Microsoft is selling four Xbox Studios as part of a major gaming sale

a team,

We have begun the most significant restructuring in XBOX history. After careful consideration, I have made the difficult decision to reduce our team by approximately 3,200 throughout fiscal year 2027. This will include approximately 1,600 role eliminations today and, in addition, will leave four XBOX studios for new management. I realize that a year-long restructuring creates additional challenges. Unfortunately, it’s not possible to make all the necessary changes in one day, and I wanted to be direct about the sizing.

I know this hurts. These changes will directly impact the people who poured their creativity into building XBOX. Many joined us through acquisitions, while others were hired here, or looked to us because they loved the industry and loved XBOX. Today’s decisions do not reflect their talent or dedication.

Our actions today are not healthy. We operate on 3 to 10 times lower margins than similar platforms and publishing companies. We entered the ninth generation with a smaller install base and higher cost structure. For growth, we are betting on Game Pass, multiple platforms and a wide range of content. Although these companies created meaningful value, they did not grow at the pace we expected. When that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better result. Now the industry is facing the most serious hardware crisis in its history. We should reset the Xbox.
First, we’ll reset our content portfolio.

Since 2018, we have aggressively expanded our studio portfolio while the number of games created each month across the industry now exceeds the past 10 years combined. We now find ourselves competing not only with the largest publishers, but also with smaller independent studios. It is neither possible nor desirable to own every great independent studio. We’ve also learned that we’re not the best home for every type of studio; In a typical year, we lose 64 cents for every dollar we invest. As we reset XBOX, we will help independent creators succeed by providing the open development tools and audiences to realize their vision.

Compulsion Games and Double Fine Productions will return to management and transition to independent studios with their own IP, catalog and runway for their next games. Ninja Theory and Undead Labs have entered into terms to join new ownership with funding to complete and grow Senua and State of Decay 3. In France, Arkane management has initiated the required consultation with its works council to review potential strategic options.

We are also making cuts in other units and, in some cases, shifting investment to focus on higher priority projects. These size changes vary across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and XBOX Game Studios. None of the games or projects publicly announced by the first party will be canceled as part of these sales.

In addition, Mojang and King will report directly to me. These two studios have increasingly become platforms and are our largest in terms of monthly active players. They bring significant geographic, demographic, and differentiation to XBOX.

Second, we will reset our platform.

We know that great technology gets better when it gets simpler, not bigger. Today, in some parts of the company, work passes through as many as 14 layers of management. Our platform teams are now 40% larger than they were at the beginning of this generation, even as our player base and playtime have declined. This complexity has slowed decisions, blurred accountability, and made it difficult to deliver to players. When we reset your XBOX, we’ll keep it simple.

We will reduce management layers to no more than 5, and where possible, 3. We will achieve success through a flatter organization built around Makers (individual contributors who focus on building), Coach Players (leaders who remain deeply involved in the business as their teams develop), and Directly Accountable Individuals (DRIs) who own key decisions and outcomes. We will simplify how we work across our tools, with a clearer code base, shared services, and a 50% reduction in supplier spend.

Third, we are resetting the way we work.

As our staff on XBOX has grown, we’ve become more divided. Teams, studios, and functions often operate independently, and it becomes difficult to work toward a common goal, make the right trade-offs, and get things done.

For the first time, we are appointing a Chief Operating Officer with end-to-end P&L responsibility across content, devices, platform and services. Helen Chiang has been promoted to this role and will report directly to me. Over nearly two decades at XBOX, Helen has helped build some of our most important businesses, from XBOX Live to the groundbreaking Mojang and Minecraft franchises. You will bring our businesses together under one operating model, ensuring that we make clear investment decisions, learn from our successes and failures, and hold ourselves accountable for results.

Thank you, Dave McCarthy, who is retiring after 17 years with XBOX. Dave has played a defining role in building the platform that millions of gamers rely on every day and has been a trusted partner during many of the biggest moments in XBOX history. We wish him all the best.

These changes are about a bigger future for XBOX, not a smaller one. The next decade of gaming will be bigger, more global, and more innovative than anything we’ve seen before. This year, we will invest in XBOX as much as we have before, but we will invest with greater focus, greater discipline and greater clarity, all in service of making XBOX where the world plays and creates.

I want XBOX to be one of the few companies that entertains over a billion people every day and gives everyone the opportunity to create and connect. I know we can achieve this goal. XBOX has many of the most beloved franchises in entertainment history and talented studios around the world, and we will return to growth in 2027.

History is full of companies that confuse longevity with determinism. We won’t be one of them.

Asha